Yen Gives Back Gains As China Shuns US Demand For 10 Percent Revaluation

Wed May 25 22:02:00 GMT 2005

by
Kathy Lien

In a near immediate response, China has rejected the Treasury’s
proposal saying that, “they will not do this when internal conditions
are not ripe, no matter how great the external pressure is.”
China did however take measures on Sunday to ease some of the upward
pressure on their currency. The State Administration of Foreign
Exchange announced a new plan to allow Chinese corporations to invest
up to $5 billion a year outside of China, which is a $1.7 billion
increase from the previous year. They are hoping that money
exiting the country for foreign investment purposes would help to
offset some of the massive speculative inflow that is flooding the
country for revaluation plays. Even as China tries to push back
calls for revaluation, they are examining various options for a more
flexible currency regime. According to the Wall Street Journal,
“the People's Bank of China has sought advice from private-sector
banks, consultants and a number of central banks, including the Hong
Kong Monetary Authority, the Monetary Authority of Singapore and the
U.S. Federal Reserve, as well as from the International Monetary
Fund.” China appears to be particularly interested in Singapore’s
managed float regime, which pegs the Singaporean dollar to a basket of
currencies. Singapore has kept the weightings of the basket a
secret, which has worked well for both the country and its currency.

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